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Term structure modeling under volatility uncertainty : a forward rate model driven by G-Brownian Motion

Hölzermann, Julian; Lin, Qian - 2019

We show how to set up a forward rate model in the presence of volatility uncertainty by using the theory of G …

Persistent link: https://www.econbiz.de/10012009895

The term structure of systematic and idiosyncratic risk

Hollstein, Fabian; Prokopczuk, Marcel; Wese Simen, Chardin - 2017

We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little...

Persistent link: https://www.econbiz.de/10011751173

Good volatility, bad volatility and option pricing

Feunou, Bruno; Okou, Cédric - 2017

upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and …

Persistent link: https://www.econbiz.de/10011777891

On the American swaption in the linear-rational framework

Filipović, Damir; Kitapbayev, Yerkin - 2016

We study American swaptions in the linear-rational (LR) term structure model introduced. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary problem that we tackle by the local time-space calculus. We...

Persistent link: https://www.econbiz.de/10011516038

Positive stock information in out-of-the-money option prices

Gkionis, Konstantinos; Kostakis, Alexandros; … - 2018

We examine whether the option market leads the stock market with respect to positive in addition to negative price discovery. We document that out-of-themoney (OTM) option prices, which determine the Risk-Neutral Skewness (RNS) of the underlying stock return's distribution, can embed positive...

Persistent link: https://www.econbiz.de/10011872403

Bond pricing under Knightian uncertainty : a short rate model with drift and volatility uncertainty

Hölzermann, Julian - 2018

It is shown how to construct an arbitrage-free short rate model under uncertainty about the drift and the volatility …

Persistent link: https://www.econbiz.de/10011891263

What option prices tell us about the ECB's unconventional monetary policies

Olijslagers, Stan; Petersen, Annelie; Vette, Nander de; … - 2018

We use a series of different approaches to extract information about crash risk from option prices for the Euro-Dollar exchange rate, with each step sharpening the focus on extracting more specific measures of crash risk around dates of ECB measures of Unconventional Monetary Policy. Several...

Persistent link: https://www.econbiz.de/10011940034

An overreaction implementation of the coherent market hypothesis and option pricing

Schöbel, Rainer (contributor); Veith, Jochen (contributor) - 2006

Inspired by the theory of social imitation (Weidlich 1970) and its adaptation to financial markets by the Coherent Market Hypothesis (Vaga 1990), we present a behavioral model of stock prices that supports the overreaction hypothesis. Using our dynamic stock price model, we develop a two factor...

Persistent link: https://www.econbiz.de/10003636657

Explaining asset pricing puzzles associated with the 1987 market crash

Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for … individual stock options, equity returns, and interest rates. -- Volatility Smile ; Volatility Smirk ; Implied Volatility …

Persistent link: https://www.econbiz.de/10008699179

Implied volatility string dynamics

Fengler, Matthias R.; Härdle, Wolfgang; Mammen, Enno - 2003

A primary goal in modelling the dynamics of implied volatility surfaces (IVS) aims at reducing complexity. For this …, neglects the degenerated string structure of the implied volatility data and may result in a severe modelling bias. We propose … value at risk computations and scenario analysis. -- Implied Volatility Surface ; Smile ; Generalized Additive Models …

Persistent link: https://www.econbiz.de/10009663844